Completing the Incomplete Thought

I can hear youRfrustrated cries of “Part 2? When did he write Part 1?” Well, you need to keep up. It appeared in the June 2006 issue, and it was called “Estimating Blind.” If you don’t have that issue, visit www.ECmag.com, and enter the headline in the keyword search box. OK? Find it, read it and then come back. Go!

My primary point in Part 1 was, “How do you estimate something that isn’t designed?” I basically told you, “Ask a lot of questions, and make sure you cover yourself”—which still holds true as we venture into Part 2.

If you asked all your questions and checked all your lists, you should now have your estimated total raw materials costs, total labor hours and should know your complete scope. Now, I want to discuss how you cover yourself beyond the estimate. It’s time to step away from the quantities of pipe and wire, boxes and rings, fixtures, fittings and straps.

Before you simply cut your material pricing, plug in the unknowns, total everything up, hit it with 10 and 2 (which I don’t recommend!) and call it a sell price.You need to look at how you are going to manage the design of this undesigned project. How are you going to prepare the drawings? Who’s going to do the design? How much of your time, your estimator’s time, engineer’s time, foreman’s time, everybody’s time, is it going to take to get this project designed, approved and ready to build?

Time is money, and the time I speak of isn’t covered by your estimated materials and labor. It isn’t in the 10 percent you carried for overhead, and it’s definitely not in the 2 percent profit you hope to make. No, this is the lost time of meetings and discussions, phone calls and sketches, writing RFIs, leaving voicemails for the architect, and explaining the job 10 times … to everyone. This is time you never think about until you get to the end of the project and realize you only made 1 percent

(I told you not to hit it with 10 and 2).

So you need to assess the time (and costs) involved with engineering and producing working, approved drawings. This shouldn’t be some arbitrary value either. Contractors are always asking me, “What do you think I should carry for engineering? $2,000? $3,000? How about 1 percent of the contract?” I always respond with “Heck if I know.”

Then, I hit them with more questions: How big is the project? How many levels does it have? How many different drawings will you have to produce? How much detail will be required? What about energy calculations and forms? Load calcs and panel schedules? Do they need to be on the plans, too? What about seismic engineering and calcs? They can be very expensive. Are you required to produce these, too?

Now, how do you estimate all this additional time and expense? First, I recommend finding a good electrical engineering firm and begin developing a plan for how you will work together as a team. You also should get a schedule of fees and some examples of how much typical projects cost to engineer. Build the schedule based on specific components for an average size project: one lighting drawing, one branch drawing, load calcs, panel schedules, seismic calcs, one line riser diagram, specifications and the engineer’s stamp (do your drawings need to be stamped?).

Now, if you have an “in-house” engineer, then you should know what their annual cost to the company is. Develop a cost basis by dividing this value by 12 months, 365 days or 2,080 hours. You then need to assess the amount of time they would be assigned on this project and simply apply your cost basis to it. Don’t fall into the trap of “$50 per hour ought to cover it.” Know your true cost and apply it.

You also should develop a schedule of fees for printing and submittals. These costs are not the biggest, but costs you will no doubt need to cover. Don’t forget the many smaller costs you will have to cover, such as shipping, delivery and your assistant’s time, too.

Additionally, you need to be very clear in your pricing proposal about which engineering services you will and will not perform. Don’t be vague! Lay out the number of engineering hours, meeting time, quantity of drawings, services, etc. Give them a “per hour adder” for addenda and revisions. Make sure your client knows exactly what they will get.

The nature of a design/build project is that of an incomplete thought. Your company has the responsibility of completing it (and paying for it).

Know how much time and engineering costs you need to carry, and make sure to apply the appropriate overhead and profit markups. Remember, you are providing a valuable service and carrying all the risk for it. You should be highly rewarded for this, just like architectural and engineering firms are. EC

Shook is the president and chief estimator for his estimating company, TakeOff 16 Inc. He has worked in the electrical construction industry for more than 18 years. Reach him at 707.776.0800 orsfs@TakeOff16.com.